ETC Announces Fiscal 2026 Full Year and Fourth Quarter Results
SOUTHAMPTON, PA, USA, June 12, 2026 – Environmental Tectonics Corporation (OTCID: ETCC) (“ETC” or the “Company”) today reported its financial results for the thirteen week period ended February 27, 2026 (the “2026 fiscal fourth quarter”) and the fifty-two week period ended February 27, 2026 (“fiscal 2026”).
Robert L. Laurent, Jr., ETC’s Chief Executive Officer and President stated, “Our strong backlog and pipeline of opportunities has resulted in the third consecutive year of positive gross profit, operating income, and net income. Net income was $3.0 million or $0.15 diluted earnings per share in fiscal 2026. We believe we remain well positioned for the future with a backlog of $61 million and strong pipeline of opportunities at February 27, 2026. Additionally, during the first quarter of fiscal 2027, ETC issued a Press Release announcing three contract awards of approximately $37.0 million, which we anticipate will increase our backlog to in excess of $80.0 million at the end of 2027 fiscal first quarter”.
Tim Kennedy, ETC’s Chief Financial Officer stated, “On May 26, 2026, subsequent to the end of fiscal 2026, the maturity date of the PNC Credit Facilities was extended from June 30, 2026 to June 30, 2028. This two-year extension marks another important milestone for ETC”.
Fiscal 2026 Results of Operations
Net Income
Net income was $3.0 million, or $0.15 diluted earnings per share, in fiscal 2026, compared to net income of $13.1 million, or $0.75 per diluted share in fiscal 2025. The $10.0 million, or 76.7% decrease is primarily attributable to a $7.8 million increase in the income tax provision, a $1.0 million decrease in gross profit, a $0.6 million increase in operating expenses, a $1.0 million increase in interest expense and a $0.5 million increase in other expense (income), net. Fiscal 2026 net income is negatively impacted by an income tax provision of $1.2 million in fiscal 2026 as compared to an income tax benefit of $5.6 million in fiscal 2025, primarily associated with the partial reversal of valuation allowance previously recorded against the deferred tax asset in fiscal 2025. The deferred tax asset valuation allowance on federal deferred tax assets and certain state deferred tax assets was reversed in fiscal 2025, as it had become and continues to be more likely than not that the Company will be able to fully realize these deferred tax assets.
Net Sales
Net sales for fiscal 2026 was $62.7 million, a decrease of $0.2 million, or 0.4%, compared to fiscal 2025 net sales of $62.9 million. The decrease is a result of lower International sales of $8.7 million within CIS offset by higher International sales in Aerospace Solutions of $3.3 million as well as higher Domestic sales of $5.2 million, $2.9 million of which are within CIS and $2.3 million within Aerospace Solu
Gross Profit
Gross profit for fiscal 2026 was $17.6 million compared to $18.5 million in fiscal 2025, a decrease of $1.0 million, or 5.2%. The decrease in gross profit was primarily due to lower ATS sales, excluding sales from the Aeromedical Center building and lower Sterilizer system sales. Gross profit margin as a percentage of net sales decreased to 28.0% in fiscal 2026 compared to 29.4% in fiscal 2025 attributable to lower gross profit margin percentage from the Aeromedical Center building being performed by a third party sub-contractor. Excluding the impact of Aeromedical Center building sales, gross profit margin percentage was 33.8% in fiscal 2026 as compared to 32.1% in fiscal 2025.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for fiscal 2026 were $10.9 million compared to $10.3 million in fiscal 2025, an increase of $0.6 million, or 6.2%. An increase in selling and marketing expenses, primarily driven by higher proposal, trade show and commission expense was partially offset by a slight decrease in general and administrative and research and development expenses.
Interest Expense, Net
Interest expense, net, for fiscal 2026 was $2.2 million compared to $1.2 million in fiscal 2025, an increase of $1.0 million, or 88.7%, due primarily to higher borrowing attributable to the leaseback of the demonstration equipment and finished goods inventory.
Other Expense (Income), Net
Other expense, net, for fiscal 2026 was $0.2 million, compared to other (income), net, of ($0.4) million in fiscal 2025 an unfavorable variance of $0.5, or 142.1% attributable to a gain realized from the sale of the Southampton, Pennsylvania demonstration equipment in fiscal 2025.
Income Tax Provision (Benefit)
An income tax provision of $1.2 million was recorded in fiscal 2026 compared to an income tax benefit of ($5.6) million in fiscal 2025. As of February 28, 2025, the Company reviewed the components of its deferred tax assets and determined, based upon all available information, that it is more likely than not that deferred tax assets relating to its federal deferred tax assets and certain state deferred tax assets will be realized. Accordingly, we reversed the previously recorded valuation allowance against these deferred tax assets. If in the future there is a change in our ability to realize these deferred tax assets, then our tax valuation allowance may increase in the period in which we determine that realization is no longer more likely than not.
Fiscal 2026 Fourth Quarter Results of Operations
Net Income
Net income was $0.1 million, or $0.00 diluted earnings per share, in the 2026 fiscal fourth quarter, compared to net income of $7.6 million during the 2025 fiscal fourth quarter, equating to $0.45 diluted earnings per share. The $7.5 million variance is a result of $3.6 million decrease in sales, $0.5 million increase in operating expenses and a $0.6 million increase in other expense attributable to the gain on the sale of the Company’s demonstration equipment in fiscal fourth quarter 2025. The 2026 fiscal fourth quarter was also negatively impacted by income tax provision of $0.3 million as compared to an income tax benefit of ($5.7) million in 2025 fiscal fourth quarter attributable to the reversal of the deferred tax asset valuation allowance. The above decrease is partially offset by a 13.8% increase in gross profit margin percentage.
Net Sales
Net sales for the 2026 fiscal fourth quarter were $15.5 million, a decrease of $3.6 million, or 19.0%, compared to net sales of $19.1 million for the 2025 fiscal fourth quarter. The decrease is primarily attributable to a $3.7 million, or 59.0% decrease in Sterilizer Systems sales and a $1.1 million, or 33.8% decrease in Aeromedical Center Building sales. The decrease was partially offset by a $1.5 million, or 140.7% and $0.7 million, or 96.0% increase in ETSS and ADMS sales, respectively.
Gross Profit
24.6% in 2025 fiscal fourth quarter. The increase in gross profit margin is primarily attributable to reduced Aeromedical Center building sales in the 2026 fiscal fourth quarter.
Operating Expenses
Operating expenses, including sales and marketing, general and administrative, and research and development, for the 2026 fiscal fourth quarter were $3.2 million, an increase of $0.5 million, or 20.6%, compared to $2.7 million for the 2025 fiscal fourth quarter. The increase in operating expenses was due primarily to higher sales and marketing expense and research and development expense partially offset by lower general and administrative expense in the 2026 fiscal fourth quarter compared to the 2025 fiscal fourth quarter.
Interest Expense, Net
Interest expense, net, for the 2026 fiscal fourth quarter was $0.6 million in the 2026 fiscal fourth quarter, a decrease of $0.1 million, or 9.6%. The decrease in interest expense, net is primarily attributable to lower interest rates on the ETC Line of Credit during 2026 fiscal fourth quarter as compared to 2025 fiscal fourth quarter.
Other Expense (Income), Net
Other expense, net, for 2026 fiscal fourth quarter was $0.1 million, compared to other income, net, of ($0.5) million in 2025 fiscal fourth quarter, a unfavorable variance of $0.6 million, or 124.6% attributable to a gain realized from the sale of the Southampton, Pennsylvania demonstration equipment in the 2025 fiscal fourth quarter.
Income Tax Provision (Benefit)
An income tax expense of $0.3 million was recorded in the fiscal 2026 fourth quarter compared to an income tax benefit of ($5.7) million in the 2025 fiscal fourth quarter. The increase in the income tax expense in the 2026 fiscal fourth quarter was driven primarily by the reversal of the valuation allowance on federal deferred tax assets and certain state deferred tax assets in the 2025 fiscal fourth quarter. This reversal is attributable to the change in the Company’s operating profit and expected ability to realize these deferred tax assets.
Liquidity and Capital Resources
As of February 27, 2026, the Company’s availability under the PNC Revolving Line of Credit was $1.2 million. This reflected cash borrowings of $12.6 million and net outstanding standby letters of credit of approximately $6.2 million. As of June 12, 2026, the date of our most current Revolving Line of Credit statement, the Company’s availability under the PNC Revolving Line of Credit was approximately $1.9 million. The Company had working capital of $22.0 million as of February 27, 2026 compared to working capital of $19.7 million as of February 28, 2025. The increase in working capital was primarily the result of an increase in accounts receivable and contract assets and a decrease in accounts payable partially offset by an increase in contract liabilities. With unused availability under the Company’s various current lines of credit, the further conversion of contract assets and inventory into cash, the collection of milestone payments associated with several International contracts, and expected deposits on fiscal 2027 bookings, the Company anticipates its sources of liquidity will be sufficient to fund its operating activities, anticipated capital expenditures, and debt repayment obligations throughout fiscal 2027.
Cash flows from operating activities
During fiscal 2026, cash flows used by operating activities were $0.4 million, a decrease of $3.5 million compared to fiscal 2025 cash flows used by operating activities of $3.9 million. Cash flows in fiscal 2026 improved as a result of increased contract liabilities and net income partially offset by an increase in accounts receivable and contract assets for the fiscal year.
Cash flows from investing activities
Cash flows from investing activities primarily relates to funds for capital expenditures in property, plant, and equipment and software development. The Company’s fiscal 2026 investing activities used $0.3 million as compared to fiscal 2025 investing activities which provided $3.6 million. The change in investing activities is attributable to $4.0 million from the sale leaseback of the demonstration equipment in Southampton, Pennsylvania in fiscal 2025.
Cash flows from financing activities
During fiscal 2026, the Company’s financing activities used $1.2 million from repayments under the Company’s credit facility compared to fiscal 2025 borrowings of $1.7 million. The decrease in borrowings in fiscal 2026 is attributable to the timing of payments received on contracts.
Financial Table Follows
Forward-looking Statements
This news release contains forward-looking statements, which are based on management's expectations and are subject to uncertainties and changes in circumstances. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements, and these statements may include terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "future", "predict", "potential", "intend", or "continue", and similar expressions. We base our forward-looking statements on our current expectations and projections about future events or future financial performance. Our forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about ETC and its subsidiaries that may cause actual results to be materially different from any future results implied by these forward-looking statements. We caution you not to place undue reliance on these forward-looking statements.